Faster networks are key for carriers as consumers flock to
smartphones such as Apple Inc.’s iPhone and handsets based on
Google Inc.’s Android system to download music, watch videos
online and surf the Web. The U.K. auction will offer spectrum in
two separate frequency bands, 800 MHz and 2,600 MHz, and
increase the amount of airwaves available to mobile phones by
more than 75 percent, Ofcom said.

“The good news for the government is that having seven
bidders should help to maximise revenue from the auction,” said
James Walsh, head of telecommunications at law firm Eversheds.

Vodafone on Dec. 17 dropped the most in more than a month
in London trading on concern that its 1.4 billion-euro ($1.85
billion) spectrum purchase in a Dutch auction will herald higher
prices in other markets. Today, the stock was down 0.6 percent
at 155.65 pence as of 12:43 p.m. Telefonica dropped 0.1 percent
in Madrid, Deutsche Telekom declined 0.1 percent in Frankfurt
and France Telecom was down 0.7 percent in Paris.

Economic Situation

The 4G auction is incomparable to the previous 3G auction,
which raised 22.5 billion pounds at the height of the dotcom
boom, Ofcom chief executive officer Ed Richards told journalists
in London today, citing a sluggish U.K. economy.

The objective of the auction was “to create long-term
economic benefits, not maximise upfront revenue,” he said.

In his autumn statement this month, U.K. Chancellor of the
Exchequer George Osborne included a projection of raising 3.5
billion pounds from the 4G auction.

Ofcom in November said it wants to raise at least 1.3
billion pounds, prior to the Dutch auction that then raised 3.8
billion euros. Ofcom said it “looked at the amounts paid by
operators in other markets and then adjusted this for the U.K.’s
circumstances.”

Valuable Frequencies

To maintain at least four national operators in the market,
Ofcom will impose maximum and minimum amounts of spectrum that
Vodafone and other operators can bid for and reserve spectrum
exclusively for a fourth operator. Hutchison Whampoa’s Three
U.K. is currently the fourth largest U.K. operator.

All the companies are seeking access to the valuable 800
megahertz band of low-frequency spectrum that can travel long
distances with fewer expensive base stations.

EE, the No. 1 wireless company in the U.K., already started
selling its faster 4G offering in 10 cities. Vodafone and others
had tried to prevent EE from offering the service before they
were able to secure the spectrum they need to offer their own.
Vodafone may be able to offer the service in the U.K. by the
middle of 2013. Hutchison Whampoa’s Three will begin 4G services
next year, using spectrum acquired from EE.